Serbia’s technology cluster is gaining momentum and attracting FDI, for both its software and hardware expertise.

It is appropriate that Serbia, birthplace of Nikola Tesla, the forefather of modern electricity, is witnessing a surge of success in electrical components, especially in the IT sector – the country’s fastest growing industry.

Serbia’s export of ICT services has grown consistently for more than a decade, and particularly strongly since 2015, reaching just over $1bn in the past two years, according to World Bank data.

An IT draw

Although Serbia is a small IT player on a global and even European scale, the sector now accounts for 10% of the country’s GDP, and is home to 2000 companies employing 20,000 people, according to the Chamber of Commerce and Industry of Serbia.

The country saw an unprecedented level of foreign investment in the ICT and electronics cluster in 2019, both in terms of project numbers and capital, according to greenfield investment monitor fDi Markets. Similarly, FDI hit record highs in the software and IT services sector.

US companies have been the most active investors in these fields, according to figures based on data collected since 2003, while fDi Markets data shows R&D activity has also grown over the past eight years. Leading global technology companies including IBM, Schneider Electric, SKF Group, Adobe, Oracle, Google, HP, SAP, Siemens, Cisco and Ericsson have set up operations in the country or licensed outsourcing services to local firms. Microsoft’s fourth global development centre opened in Serbia in 2005, and US-based NCR, a global leader in consumer transaction technologies, employs 3758 people in the country.

Serbian IT salaries are almost three times higher than the national monthly average of €520, but remain well below the EU average for the sector.

Golden ratio

Foreign investors tend to find a good balance between cost and quality in Serbia’s ICT sector. “The expertise in Belgrade is good, offering some of the best quality for price in south-eastern Europe and the Balkans,” says Zeki Jusufoski, development director at US-based Drivosity, a provider of traffic safety software that has a team of developers in Serbia. “There is a good cluster of companies here for us to interact with. It’s a vibrant community. In the past 10 years, the number of companies here has doubled,” he adds.

When judged upon FDI attractiveness in software development centres in comparison with its EU member neighbours (Romania, Hungary, Bulgaria and Croatia) Serbia comes in second to Romania, according to research by fDi Benchmark.

In another draw for would-be investors, an impressive 30% of all Serbian university students are currently enrolled in engineering, mathematics, IT and computing courses, with more than 35 higher education institutions offering these programmes, according to the Statistical Office of the Republic of Serbia. Meanwhile, Serbia ranks 17th out of 100 countries in the EF English Proficiency Index.

As a further incentive, in the past two years, the Serbian government has increased financial incentives for innovative activities, for example, by applying double deduction tax for every euro spent on R&D by a company in Serbia, and by offering a 30% tax credit for investments in start-up companies engaged in tech innovation.